Chemical profile: US HDPE

26 July 2013 08:48[Source: ICB]

USES

The major outlet for high density polyethylene (HDPE) is in blow-moulded products such as milk bottles, packaging containers, drums, car fuel tanks, toys and household goods. Film and sheet are widely used in wrapping, refuse sacks, carrier bags and industrial liners. Injection-moulded products include crates, pallets, packaging containers, house wares and toys. Extrusion grades are used in pipes and conduit.

SUPPLY/DEMAND

In the US, demand for HDPE exports was strong at the start of 2013, with demand growth up by 7% for the first two months of the year, led by strong export sales growth of over 20%. Domestic demand rose early in the year, but began to wane by April, causing producer inventories to rise. Plant outages and force majeures in the HDPE sector beginning in May caused inventories to drop significantly.

By June, as many of the upstream crackers and HDPE units came back online, producer inventories began to build again. HDPE production increased during the month, while domestic and export sales volumes fell, compared with the previous month, according to the American Chemistry Council (ACC).

Supply is expected to improve in the second half, as plants return to more regular rates following planned and unplanned outages. Operating rates are expected to remain above 90% for most of the next few years, before additional capacity is added, sources said.

PRICES

US HDPE prices have risen on average by 11 cents/lb during the first six months of the year, based on a jump in spot ethylene prices, as well as reduced supplier inventory levels.

Prices rose on average by 9 cents/lb in the first three months of the year, and held steady in April and May, despite producers' efforts to push through an additional 4 cent/lb increase both months.

Producers are again seeking a 2 cent/lb increase for HDPE grades in July. The market is split on whether suppliers will be able to implement such an increase.

US June contract prices were at 74-76 cents/lb for HDPE blow moulding, 75-77 cents/lb for HDPE injection and 76-78 cents/lb for HDPE high molecular weight film grades DEL (delivered) to small volume buyers.

TECHNOLOGY

HDPE is produced by the catalytic polymerization of ethylene in either slurry (suspension) solution or gas-phase reactors. Some processes can switch to produce LLDPE. The choice of catalyst and/or the use of bimodal processes is used to modulate the quality of the output. The development of metallocene catalysts also allows slurry-loop operators to enter the LLDPE sector. Bimodal processes claim to produce resins competitive with those from metallocene.

OUTLOOK

In North America, demand for all plastic film is projected to rise by 1.8%/year to 15.9bn lb in 2016, according to US-based research firm The Freedonia Group. Demand is expected to follow GDP growth closely. However, demand for HDPE film is estimated to grow at a below average pace as a result of slow retail bag sales, according to Freedonia.

Demand for HDPE blow moulding and injection grades will continue to account for a significant portion of the HDPE market. However, the strongest growth rate is expected to be seen in the HDPE pipe market in North America, based on activity related to the shale gas boom, sources have said.

Potential growth in the US export market is driving capacity-expansion talk in North America. For 2012, export sales of PE accounted for roughly 17-22% of total sales for the year, according to the ACC. By the end of the decade, some analysts predict the share of US PE production going into exports could rise by as much as 42%.

Already, 10 companies say they plan to expand PE capacity in the region, and between the 11 planned projects, nine have defined capacities amounting to a total of 5.58m tonnes/year. A few of the announced projects will be in the LDPE and LLDPE sectors. If all of the plants proceed as planned, the PE industry will see a 28.7% boost to existing North American PE capacity of 19.4m tonnes/year, says ICIS analysis. That growth could come in the span of three years, with new capacity set to come online between 2015-2017.